One in seven German workers work in the auto industry

A first round of talks between VW management and representatives from the IG Metall union ended without any significant progress, both sides said.

VW has warned that 30,000 jobs could be lost at its six German plants unless staff accept a two year pay freeze.

Unions argue a freeze is unacceptable, demanding instead a 4% annual rise.

Long haul

The two sides will resume negotiations on October 5, with talks expected to continue through the month.

Separately, talks which could have seen VW sell a 9.8% stake to the Gulf emirate of Abu Dhabi have collapsed.

VW has pursed the deal as a way of facilitating its 2bn euro purchase of car fleet management firm LeasePlan.

Volkswagen says it needs to save 500m euros in costs to guarantee the future of its 176,000 strong German workforce in the face of growing competition from rivals operating out of low cost eastern European markets.

As well as a two year pay freeze, VW wants workers to accept longer working hours without extra pay and a reform of overtime payments.

Work guarantees

Unions have threatened protests and stoppages in their pursuit of a 4% wage deal and guarantees from the company over future employment.

Chief union negotiator, Hartmut Meine, told the Associated Press that the two sides were "miles apart" after Wednesday's meeting.

Josef Senn, who is leading negotiations on behalf of VW, said that the company could not offer guarantees to workers unless "we get the corresponding cost savings from IG Metall".

VW's profitability has been steadily eroded in recent years by fierce price competition in Germany and the US.

The wage negotiations are being seen as a litmus test of whether German's leading industrial firms can introduce more flexible employment practices.

Siemens concluded a deal earlier this year in which IG Metall workers at its German telephone plants agreed to an unfunded five hour increase in the working week in order to save jobs from moving to Hungary.